How can you choose the best cash management solution for a multinational corporation?

1 Cash pooling

One of the main objectives of cash management is to centralize and consolidate the cash resources of the MNC and its subsidiaries, in order to reduce the cost of borrowing, increase the return on surplus cash, and enhance the visibility and control over the cash position. Cash pooling is a technique that allows the MNC to aggregate the cash balances of its subsidiaries in one or more accounts, either physically or virtually. Physical cash pooling involves transferring the actual cash from the subsidiaries' accounts to a master account, while virtual cash pooling involves offsetting the debit and credit balances of the subsidiaries' accounts without moving the cash. Depending on the legal and tax implications, the MNC can choose between different types of cash pooling, such as zero-balancing, target-balancing, or notional pooling.

2 Cash forecasting

Another key aspect of cash management is to forecast the future cash inflows and outflows of the MNC and its subsidiaries, in order to plan ahead and avoid liquidity gaps or excess cash. Cash forecasting is a process that involves collecting, analyzing, and projecting the cash data from various sources, such as sales, purchases, inventory, payables, receivables, taxes, capital expenditures, and financing activities. Cash forecasting can be done at different levels of granularity, frequency, and horizon, depending on the needs and objectives of the MNC. For example, a short-term cash forecast can help the MNC to manage its daily cash operations and optimize its cash pooling, while a long-term cash forecast can help the MNC to align its cash strategy with its business strategy and identify potential opportunities or risks.

5 Cash governance

A fifth aspect of cash management is to establish a cash governance framework that defines the roles, responsibilities, and authorities of the cash decision-makers and stakeholders within the MNC and its subsidiaries. Cash governance is a system that ensures the accountability, transparency, and effectiveness of the cash policies, procedures, and controls. Cash governance can include various elements, such as the cash organization structure, the cash reporting and monitoring mechanisms, the cash risk management and compliance functions, and the cash audit and evaluation processes. Cash governance can help the MNC to coordinate and align its cash activities and initiatives, to mitigate and manage its cash risks and issues, and to measure and improve its cash performance and outcomes.

6 Cash innovation

A sixth aspect of cash management is to pursue cash innovation that can create value and competitive advantage for the MNC and its subsidiaries. Cash innovation is a process that involves identifying, developing, and implementing new or improved cash solutions that can address the current or future cash needs and challenges. Cash innovation can be driven by various factors, such as the changes in the customer preferences, the market trends, the industry dynamics, and the technological developments. Cash innovation can help the MNC to differentiate its cash offerings and services, to enhance its cash efficiency and effectiveness, and to adapt to the changing cash environment and expectations.